Good morning, and welcome to the Icahn Enterprise LP Q3 2018 Earnings Call with Jesse Lin, General Counsel Keith Cozza, President and CEO Sung hwan Cho, Chief Financial Officer. I would now like to hand over the call to Jesse Lynn, who will read the opening statement.
Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. These forward looking statements involve risks and uncertainties that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our expectations will be realized. We assume no obligation to update or revise any forward looking statements should circumstances change, except as otherwise required by law.
This presentation also includes certain non GAAP financial measures. A reconciliation of such non GAAP measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. I'll now turn it over to Keith Cozza, our Chief Executive
Officer. Thanks, Jesse. Good morning, and welcome to the Q3 2018 Icahn Enterprises earnings Call. Joining me on today's call is Sung hwan Cho, our Chief Financial Officer. I will begin by providing some brief highlights.
Sung will then provide an in-depth review of our financial results and the performance of our business segments. We will then be available to address your questions. For Q3 2018, we had net income attributable to Icahn Enterprises of $126,000,000 or $0.68 per LP unit compared to net income of $597,000,000 or $3.53 per LP unit in the prior year period. Net loss attributable to Icahn Enterprises from continuing operations for Q3 2018 was $29,000,000 or $0.16 per LP unit compared to net income of $577,000,000 or $3.41 per LP unit in the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for Q3 2018 was $26,000,000 compared to 345,000,000 dollars for Q3 of 2017.
Subsequent to quarter end, we closed on our previously announced sales of both Federal Mogul and Tropicana Entertainment. We sold Federal Mogul to Tenneco for $800,000,000 in cash and 29,500,000 shares of Tenneco common stock. All of Federal Mogul's outstanding debt at the time of closing was assumed by Tenneco. We sold Tropicana's real estate to Gaming and Leisure Properties Inc. And merged Tropicana's Gaming and Hotel operations into Eldorado Resorts Inc.
For an aggregate consideration of approximately 1,850,000,000 dollars The transaction did not include Tropicana's Aruba assets, which were acquired by a subsidiary of IEP prior to closing. Subsequent to quarter end, we also entered into a definitive agreement to merge our majority owned subsidiary American Railcar Industries with a wholly owned subsidiary of ITE Rail Fund LP at a price of $70 per share in cash. IEP's investment in ARI has generated a total return of 423 percent for a profit of approximately 757,200,000 Our investment funds had a negative return of 6.3 percent in Q3 2018 compared to positive 5.1% for the prior year period. Our negative performance in Q3 was driven by net losses in our short equity index positions offset in part by net gains in our core long equity positions. Net sales and service revenues for our automotive segment in Q3 2018, which excludes the operating results of Federal Mogul were 7 $35,000,000 compared to $700,000,000 in the prior year period.
The increase was primarily due to acquisitions at ICON Automotive Group as well as organic sales growth in the commercial and service businesses. In our Energy segment, our Q3 2018 net sales were 1,900,000,000 dollars and consolidated adjusted EBITDA was $236,000,000 CVR Refining had a solid third quarter led by strong crack spreads, low RIN prices and wide crude oil differentials. CBI Partners also had strong operating performance in the Q3 at both its Coffeyville and East Dubuque facilities. Market conditions have continued to improve since the summer and global demand for nitrogen fertilizer is strong. As you can see, we are having a very busy year.
Economic conditions remain strong, which has helped facilitate the sale of several large operating segments, resulting in significant gains for our unitholders and robust liquidity on our balance sheet. With that, let me turn it over to Sung.
Thanks, Keith. I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet. In Q3 2018, net income attributable to Icahn Enterprises was $126,000,000 compared to net income of $597,000,000 in the prior year period. Net loss attributable to Icahn Enterprises from continuing operations for Q3 2018 was $29,000,000 compared to net income of $577,000,000 in the prior year period. As you can see on Slide 5, in Q3 2018, the performance of the investment funds was the primary driver of our net loss from continuing operations for the quarter.
Q3 2017 income benefited from the sale of the Fontainebleau property in Las Vegas. Adjusted EBITDA attributable to Icahn Enterprises for Q3 2018 was $26,000,000 compared to $345,000,000 in Q3 2017. I will now provide more detail regarding the performance of the individual segments. Our Investment segment had a loss attributable to Icahn Enterprises of 2 0 $6,000,000 for Q3 2018. The investment funds had a negative return of 6.3% in Q3 2018 compared to a positive return of 5.1% for Q3 2017.
Long positions had a positive performance attribution of 1.1% for the current quarter, while short positions and other expenses had a negative performance attribution of 7.4%. Since inception in November 2004 through the end of Q3 2018, the investment fund's gross return is 128% or approximately 6.1 percent annualized. The investment funds continue to be significantly hedged. At the end of Q3 2018, net short exposure was 26% compared to a net long exposure of 14% at the end of 2017 and a net long exposure of 11% at the end of Q2 2018. IAP's investment in the funds was $3,000,000,000 as of September 30, 2018.
In October, we invested a portion of the Federal Mogul and Tropicana sale proceeds into the funds increasing our total fund investment by 1 $850,000,000 And now to our Energy segment. For Q3 2018, our Energy segment reported revenues of $1,900,000,000 and consolidated adjusted EBITDA of $236,000,000 compared to revenue of $1,400,000,000 and consolidated adjusted EBITDA of $142,000,000 for the prior year period. CVR Refining had a solid third quarter performance led by strong crack spreads, wide crude oil differentials and lower RIN prices. CBR Refining reported Q3 2018 adjusted EBITDA of $221,000,000 compared to $139,000,000 in the prior year period. Combined crude oil throughput was approximately 209,000 barrels per day for the quarter, which was 2% above the prior year period.
Refining margin adjusted for FIFO impact, a non GAAP financial measure, was $15.41 per barrel in Q3 2018 compared to $13.05 per barrel in the prior year period. CVR Refining declared a distribution of $0.90 per unit for the quarter. CVR Partners reported Q3 2018 adjusted EBITDA of $19,000,000 compared to $5,000,000 in Q3 2017. Market conditions have continued to improve since summer and global demand for nitrogen fertilizer is strong. Average prices for UAN and ammonia were $170 per ton $2.97 per ton respectively in Q3 2018 compared to $138 per ton and $2.14 per ton respectively for the same period in 2017.
Now to the Automotive segment. Q3 2018 net sales and service revenue for Icahn Automotive Group were $735,000,000 up 5 from the prior year period. The increase was due to $18,000,000 of organic revenue growth and $29,000,000 of growth from acquisitions, offset in part by $12,000,000 due to the effect of adoption of new revenue recognition standards. On an organic basis, commercial sales increased $18,000,000 or 8%, driven by increases in both IEH Auto and Pep Boys commercial programs. Service sales increased $8,000,000 or 3% due to growing do it for me and fleet businesses and retail sales decreased $8,000,000 or 5%.
Adjusted EBITDA attributable to IEP for the Automotive segment was $8,000,000 in Q3 2018 compared to $16,000,000 in the prior year period. Profitability was lower due to the expenses related to the transformation and additional costs of the commercial business. Now turning to the railcar segment. Our railcar segment had railcar shipments in Q3 2018 of 6 54 railcars, including 387 railcars to leasing customers compared to 893 railcars for the prior year period, of which 275 railcars were to leasing customers. As of September 30, 2018, ARI had a backlog of 11,200 and 15 railcars, including 1486 railcars for lease customers.
According to the Railway Supply Institute, the railcar manufacturing backlog was approximately 74,000 railcars at the end of Q3 2018. 80% of the current industry backlog is comprised of tank cars and covered hopper railcars, the 2 primary railcar types manufactured and leased by our railcar segment. Total manufacturing revenues for Q3 2018 decreased by $28,000,000 or 41% compared to the prior year period. The decrease was primarily due to a decrease in shipments to non leasing customers. The segment's railcar leasing revenue declined in Q3 2018 as compared to the prior year period due to a decrease in leased railcars as a result of selling the remaining railcars previously owned by ARL, a decrease in weighted average lease rates and increased time off lease for railcar reassembments.
The lease fleet was 13,506 railcars at the end of Q3 2018, down from 17,122 railcars at the end of Q3 2017 due to the further sale closings of the ARL lease fleet. Adjusted EBITDA attributable to IEP for the railcars segment was $24,000,000 in Q3 2018 compared to $38,000,000 in the prior year period. As Keith mentioned earlier, subsequent to the quarter end, we entered into an agreement to merge ARI with ITE Rail Fund at a price of $70 per share payable in cash. We expect this transaction to close in Q4 2018. Now turning to our Food Packaging segment.
Net sales for Q3 2018 decreased by $1,000,000 or 1% compared to the prior year period. The decrease was primarily due to the lower price and product mix and lower sales volume offset in part by favorable effects of foreign exchange. Consolidated adjusted EBITDA was $14,000,000 in Q3 2018, which was $3,000,000 below the prior year period. Gross margin as a percentage of net sales was 21% for Q3 2018 compared to 24% in the prior year period. Profitability in Q3 was impacted by the Brazilian currency devaluation as well as a typhoon in the Philippines.
And now to our Metal segment. Net sales for Q3 2018 increased by 10,000,000 percent compared to the prior year period. The net sales increase was primarily due to higher shipment volumes of ferrous and higher average selling prices for almost all product lines, offset in part by lower non ferrous volumes. Ferrous shipment volumes increased due to improved demand from domestic steel mills and improved flow of raw materials into the recycling yards driven by increased market pricing. Non ferrous shipment volumes decreased due to a domestic over significantly curtailed scrap imports.
Adjusted EBITDA was $5,000,000 in Q3 2018, which was consistent with the prior year period. And now to our Real Estate segment. Real Estate operating revenues were $29,000,000 for Q3 2018, which was $8,000,000 above the prior year period. Revenue from our real estate operations for both Q3 2018 and Q3 2017 were substantially derived from income from club and rental operations. The segment recorded a $67,000,000 gain in the period from the sale of 1 of its triple net leased properties.
Q3 2017 also included a significant gain from the sale of the Fontainebleau property in Las Vegas. The Real Estate segment generated $14,000,000 of adjusted EBITDA in Q3 2018. And now to our Mining segment. Our Mining segment has been concentrating on sales in Brazil. In Q3 2018, sales increased $5,000,000 as compared to the prior year period, primarily due to iron ore price and volume increases.
Consolidated adjusted EBITDA was $6,000,000 in Q3 2018, which was $2,000,000 above the prior year period. The company continued its investment to produce higher quality iron ore, which currently sells for significant premiums. The project is on schedule and expected to fully ramp up in early 2019. Now turning to our Home Fashion segment. Q3 2018 net sales of our home fashion segment were down 17% compared to the prior year.
Adjusted EBITDA was a loss of $1,000,000 for the quarter compared to a loss of $2,000,000 in the prior year. Gross margin as a percentage of net sales was 13% for Q3 2018 as compared to 15% in Q3 2017. Now I will discuss our liquidity. We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended Q3 2018 with cash, cash equivalents, our investment in the funds and revolver availability totaling approximately $4,900,000,000 Our subsidiaries have approximately $1,000,000,000 cash $810,000,000 of undrawn credit facilities to enable them to take advantage of attractive opportunities.
Our liquidity has improved significantly with the closing of sales of Federal Mobile, Tropicana and several real estate assets. Pro form a those sales are cash, cash equivalents, investment in the funds and revolver availability increases to $7,700,000,000 Slide 17 shows our indicative net asset value over time. The indicative net asset value has increased by over $1,500,000,000 or 22 percent in the last 12 months. We show September 30, 2018 pro form a for the asset sales and redeployment of capital that incurred after quarter end. You can see that the increase in the fund investment and our new minority holding in Tenneco.
It is worth noting that cash and the fund investments now exceed the value of our holding company debt. In summary, we continue to focus on building asset value and maintaining ample liquidity to enable us to capitalize on opportunities within and outside of our operating segments. With that, operator, can you please open the call for questions?
Yes. Thank you. We will now take questions as part of our Q and A session. Our first question comes from James Steels from Jefferies. Your line is now open.
Yes. Hi. Thank you for taking our question. I guess just sort of generally on the capital position and how we should be thinking about modeling going into 2019. Just curious if maybe we should be if most of that's probably earmarked for the hedge fund or if there might be some other uses such as debt pay down or capital return?
Yes, sure. Hi, James, it's Keith. No, I think if you and there's a slide in the webcast that shows a pro form a because the Tropicana and Federal Mogul deals literally closed on October 1. And so that provided an inflow of $2,200,000,000 to $2,300,000,000 If you look at that slide, the pro form a significant portion of those funds about, I'd say, dollars 1,800,000,000 went into the Investment segment and the rest is cash being held at HoldCo, but there are no current plans to retire any debt. But we're on the lookout for additional operating companies and we continue to do what we've historically done in our Investment segment.
Okay.
And then just sort of on that note, I know that you don't usually give intra quarter commentary, but just curious if the volatile environment in October and then maybe even more recently in terms resulted in changes to the positioning of the hedge fund?
I don't think the market volatility impacted our investment strategy. But as you can see from the change in exposures at the end of Q2, we were net long a little bit. And if you look at the end of Q3, we kind of went the other way and were a bit net short. That reflected our view of increased risks in the marketplace and wanting to protect the investment segment from macro risk. So I would just point to that we ended the quarter net short, which is obviously helpful in a month like October.
Okay.
And then maybe just one more, just kind of generally on the railcar transaction, still expected to close in 4Q, I take. Has there been any update on the from the regulators? Or just kind of any color on how that transaction is closing?
Well, what I'm comfortable sharing is it's public that the buyer already received antitrust clearance that's been made public on the FTC's website as well as in the information statement. So antitrust was obviously a significant hurdle and we expect it to close in Q4.
All right, excellent. Thanks for the time.
Okay, thank you.
Thank I currently have no more questions in queue.
Okay. Thanks, operator. All right. Thank you, everybody. We'll look forward to talking to you in February with the year end results.
Have a good day.